The 2021 open enrollment season is quickly approaching. This week the IRS released Rev. Proc. 2020-36 which, among other items, set the affordability threshold for employers in 2021. In order to avoid a potential section 4980H(b) penalty, an employer must make sure one of its plans provides minimum value and is offered at an affordable price.
A plan is considered affordable under the ACA if the employee’s contribution level for self-only coverage does not exceed 9.5 percent of the employee’s household income. This 9.5 percent threshold is indexed for years after 2014. In 2021 the affordability threshold will be 9.83 percent which is up slightly from the 2020 affordability threshold of 9.78 percent.
An employer wishing to use one of the affordability safe harbors will use the 2021 affordability threshold of 9.83 percent when determining if the safe harbor has been satisfied. The first affordability safe harbor an employer may utilize is referred to as the form w-2 safe harbor. Under the form w-2 safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of that employee’s form w-2 wages (box 1 of the form w-2) from the employer for the calendar year.
The second affordability safe harbor is the rate of pay safe harbor. The rate of pay safe harbor can be broken into two tests, one test for hourly employees and another test for salaried employees. For hourly employees an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of the product of the employee’s hourly rate of pay and 130 hours. For salaried employees an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of the employee’s monthly salary.
The final affordability safe harbor is the federal poverty line safe harbor. Under the federal poverty line safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of the monthly Federal Poverty Line (FPL) for a single individual. The annual federal poverty line amount to use for the United States mainland in 2021 is $12,760. Therefore, an employee’s monthly cost for self-only coverage cannot exceed $104.52 in order to satisfy the federal poverty line safe harbor.
Obviously employers are dealing with a lot of issues as the COVID-19 crisis continues to impact almost every employer in the country. However, it is important for employers to remain compliant with the always evolving ACA rules and regulations. When planning for the 2021 plan year, every employer should check to make sure at least one of its plans that provides minimum value meets one of the affordability safe harbors discussed above for each of its full-time employees. It would not be surprising if individuals were more scrupulous with their healthcare choices in 2021 which could leave noncompliant employers exposed to section 4980H(b) penalties.
The U.S. Supreme Court recently ruled that employers can’t terminate workers based on their lesbian, gay, bisexual, transgender or queer (LGBTQ) status, and employers should understand that the ruling provides employment protections beyond being fired.
The court ruling is significant as the decision makes clear that “sex” discrimination under Title VII of the Civil Rights Act of 1964 includes sexual orientation and gender identity.
Title VII prohibits an employer from discriminating against workers based on protected characteristics with respect to terms and conditions of employment, including hiring, firing, laying off, training or disciplining.
An employer may not discriminate with respect to benefits provided to any group of similarly situated workers that includes members of a protected class, and that would be particularly true with respect to health care coverage, parental leave and similar emoluments.
Employers should thoroughly review their application, hiring and ongoing work processes to look for issues that may relate to these areas, said Randy Coffey, an attorney with Fisher Phillips. The review should include health plan coverage and procedures, leave and insurance benefits, and any other areas in which LGBTQ employees conceivably might be affected or treated differently from other employees, he said.
Workplace Protections
Under Title VII, employers are prohibited from discriminating against workers because of their color, national origin, race, religion or sex. The act makes it unlawful for an employer to “fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment.”
The Supreme Court held in its landmark ruling, Bostock v. Clayton County, Ga., that an employee’s “homosexuality or transgender status is not relevant to employment decisions.” Federal appeals courts had disagreed on whether Title VII’s ban on discrimination based on sex included LGBTQ status, but the high court found that “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”
The decision focused on unlawful terminations, which were the subject of the cases before the court, but the ruling extends to all employment actions that are protected under Title VII.
“The Supreme Court’s decision not only prohibits an employer from refusing to hire or discharging an employee based on LGBTQ status, but also prohibits treating employees differently in the spectrum of compensation, terms or conditions of employment because of the individual’s LGBTQ status,” explained Amy Blaisdell, an attorney with Greensfelder, Hemker & Gale in Chicago and St. Louis.
Of course, employers will still be able to defend such discrimination claims in the same ways they have defended against other Title VII discrimination charges. In the event that an employee can make a viable, initial claim of discrimination—or prima-facie case—the employer will then have the opportunity to show nondiscriminatory reasons for the employment action.
As is the case generally with respect to Title VII, it is a best practice not only to be fair but to document employee-related decisions, furnish accurate evaluations, and maintain and publicize anti-discrimination policies.
Employers should note that Title VII applies to employers with at least 15 employees, though many state and local anti-discrimination laws that protect LGBTQ workers apply to smaller employers.
Scope of the Ruling
“There are definite health and benefit considerations for employers stemming from the court’s ruling,” Blaisdell said. For example, LGBTQ employees may rely on the case to argue that employers are required to offer medical plans providing transgender medical benefits to them.
“Yet, many faith-based employers decline coverage for such services on the basis that covering transgender benefits would conflict with moral and religious teachings,” she said. “This push and pull between individual rights and religious liberties was left unresolved by the court’s decision.”
Jay Dade, an attorney with Polsinelli in Kansas City, Mo., said he would caution anyone from drawing legal conclusions past the issues addressed by Bostock—that is, those of employment. However, he noted, employers are always free to offer protections beyond those provided by applicable laws and many provide employment protections to LGBTQ employees through workplace policies.
“The court also made it a point to note that these cases did not require the court to address concerns about religious conviction,” added Jason Plowman, also an attorney with Polsinelli in Kansas City, Mo. On that point, the court specifically noted that “how these doctrines protecting religious liberty interact with Title VII are questions for future cases” because “none of the employers before us today represent in this court that compliance with Title VII will infringe their own religious liberties in any way.”
The intersection of these two sets of protections will almost certainly be a focus of future litigation related to sexual orientation and gender identity, along with how the Bostock ruling applies or does not apply in other contexts, Plowman said.
For instance, the U.S. Department of Health and Human Services (HHS) announced a final rule on June 12, three days before the Bostock decision, that eliminated anti-discrimination protections based on gender identity in health care and health insurance that the agency said were unenforceable and exceeded the prior administration’s authority.
“The Supreme Court ruling does not directly impact the recent HHS rule,” noted Jeffrey Smith, an attorney with Fisher Phillips. That’s because the HHS interpretation is based on Section 1557 of the Affordable Care Act, while the Supreme Court was interpreting provisions of Title VII.
“That said, it does demonstrate a shift in the legal landscape, and it may be harder for HHS to continue to enforce the interpretation it has just released,” Smith added.
Coffey said employers should expect a wave of litigation over the “outer reaches” of the Bostock decision. “There is no question that there will be many new filings alleging discriminatory failures to hire, harassment and hostile work environment claims, and discriminatory termination, all based on the sexual orientation, transgender status or gender identity of applicants and employees.”
Review Policies
For many employers, the Bostock decision will reinforce their policies prohibiting discrimination in employment on the basis of sexual orientation and gender identity, said Lori Armstrong Halber, an attorney with Reed Smith in Philadelphia and Princeton, N.J. Other employers will need to amend their policies immediately to include sexual orientation and gender identity within the classes protected from discrimination in their workplace.
“All employers would be best served by taking the opportunity to educate and train their employees on their anti-discrimination and anti-harassment policies and to focus some of that training on LGBTQ bias,” she said.
IRS Notice 2020-44 was issued last week as a reminder that Patient-Centered Outcomes Research Institute (PCORI) fees were extended under the Further Consolidated Appropriations Act of 2020 and are now not scheduled to expire until plan years ending after September 30, 2029. Annual PCORI fees will still need to be paid by insurers for employers with fully insured group health plans (and will remain to be included in annual premiums). Groups that offer self-insured plans are responsible for filing and paying the fee on IRS Forms 720, which must be filed by July 31 each year.
The IRS Notice also clarifies there is still a filing obligation owed for all such group health plan filings for plan years ending on or after October 1, 2019, and before October 1, 2020, with the PCORI Fee amount being $2.54 (up from $2.45 for the previous PCORI fee period). However, the guidance recognizes that insurers and self-funded plan sponsors may not have been accurately tracking the number of covered lives to be reported and paid for the plan year periods from October 1, 2019, through October 1, 2020, because the previous PCORI fee assessments under the Affordable Care Act were scheduled to end after September 30, 2019. To allow for ease in current reporting of covered lives information, the Notice clarifies that in addition to the other statutory methods of reporting covered lives, for the PCORI reporting periods for plan years ending from October 1, 2019, through October 1, 2020, the IRS will allow insurers and plan sponsors to use a “reasonable” method to calculate the average number of covered lives for this period.
Impact on Employers
Employers with fully insured health plan coverage provided by an insurance carrier may see a slight increase in future insurance premiums to account for this recent update from the IRS. Self-funded health plan sponsors need to ensure they timely file their annual Form 720 by July 31, 2020, using the appropriate PCORI fee amount (i.e., $2.45 per covered life for plan years ending on or before September 30, 2019, or $2.54 per covered life for plan years ending on or after October 1, 2019), based on the calculated covered lives formula alternatives (e.g., actual count method, snapshot method, Form 5500 method, or for the October 1, 2019, through October 1, 2020, periods, a “reasonable” method for average covered lives).
If you are feeling a sense that the rules around benefits haven’t changed enough in the last three months, this is a reminder of a change made during the long ago time of December 2019. We all thought the annual PCORI (Patient-Centered Outcomes Research Institute) was set to expire back in 2019 but the SECURE Act extended the PCORI fee for another 10 years, meaning the fee will be in effect until 2029 for most plans (2030 for others, depending on the plan’s year-end).
If your company had a self-insured group health plan in 2019, make sure you’ve set your calendar alerts to pay the PCORI fee for the 2019 plan year. As a reminder, the PCORI fee was put into place by the ACA to help fund the Patient Outcomes Research Institute and is based on the average number of covered lives under the plan. The fee and the related IRS Form 720 are due no later than July 31st.
For plan years ending before October 1, 2019, the fee is $2.45/person. The IRS has not announced the specific fee for plan years ending between October 1, 2019 and December 31, 2019; however, it is expected to be slightly higher than $2.45 per covered member. Remember, covered lives include spouses, dependents, retirees, and COBRA beneficiaries. If you have not been through this process before, or if you just need a quick refresher, the IRS has issued detailed guidance on the multiple methods you may use to calculate the PCORI fee, as well as instructions for completing the Form 720 and submitting your payment.
With employees returning to work and companies reopening their doors to customers, employers are looking for ways to limit liability related to potential COVID-19 cases contracted in the workplace. To do so, many are considering waivers for not only their employees, but also for customers. Such waivers, however, are somewhat limited in their effectiveness and employers should consider the pros and cons before attempting to implement them. You may also want to consider an alternate strategy that may offer you some of the assurances you seek without many of the negatives associated with waivers.
No waiver or other attempt at limiting liability can replace the need to maintain a safe workplace. You should start by ensuring you are in strict compliance with local orders, state regulations, and guidance from government agencies like the Centers for Disease Control and Prevention (CDC), Occupational Safety and Health Administration (OSHA), Equal Employment Opportunity Commission (EEOC), and local health authorities.
What Are Waivers?
The term waiver has more than one meaning. In this context, employers may look to a waiver and releases of liability agreement consisting of a series of contractual provisions to mitigate certain risks of liability. Such an agreement not only includes a waiver clause, but also includes additional protective provisions like clauses for assumption of risks, covenants not to sue, and identification. If enforceable, they would eliminate liability for the risks discussed within.
Employee Waivers
Waiver agreements between employers and employees are traditionally disfavored due to the unequal bargaining power between them, as employers typically have superior bargaining power. In most states, such waivers do not apply to gross negligence or willful, intentional, or wanton conduct, as employers cannot waive such liability.
Employee waivers are even further limited due to workers’ compensation statutes, where states generally require medical expenses, lost wages, and rehabilitation costs be provided to employees injured in the course and scope of their employment. For work-related injuries, employees generally cannot waive their worker’s compensation claims. Although it may be difficult for employees to prove they contracted COVID-19 at work, some states (like California) have created a rebuttable presumption that workers who contract COVID-19 are presumed to have a workplace injury covered by the workers’ compensation system.
Waiver agreements with employees do not protect employers from OSHA complaints or enforcement action when a workplace is dangerous. However, the president recently signed an executive order directing federal agencies, like OSHA, to make exceptions for employers who attempt in good-faith to follow agency regulations during the COVID-19 pandemic, which may ease some concerns about agency actions.
Practically speaking, waivers may discourage employees from returning to work and hinder restarting operations as a result. They may also result in negative reactions and publicity concerns, as has occurred in several instances across the country already.
But due to the COVID-19 pandemic, it remains unclear whether courts and states will allow employers to enforce waiver agreements in this unprecedented time. Regardless of whether you decide to institute COVID-19 waivers to your returning workforce, you should develop return-to-work plans including steps to train employees on any exposure danger, how to eliminate those dangers, and best practices to stay safe.
Customer Waivers
Waivers for your customers may limit your company’s liability associated with COVID-19, but they may also hurt your business. Employers must carefully decide if the benefits of liability waivers for customers outweigh their drawbacks for their business. Some positives aspects of customer waivers include that they:
However, customer waivers have downsides too, as they:
Evaluating how a waiver will affect your business requires you to look at your industry, business, and geographic area, as well as how your customers or the public will react. Customers generally do not expect to sign a waiver before shopping or dining in a restaurant. But waivers are common in potentially dangerous activities, like extreme sports, where adding a COVID-19 clause may go unnoticed. Overall, customer waivers could impact businesses in more ways than simply mitigating their liability, so businesses must first consider potential unintended consequences.
Other Strategies: Notices And Questionnaires
Alternate routes to limiting liability may be more beneficial than waivers for many businesses. Businesses may avoid the potentially ominous effect of forcing customers to sign waivers by using questionnaires or notices.
A questionnaire asks entrants to the premises questions about whether they have any of the symptoms of COVID-19 or were exposed to it. A questionnaire could also communicate the employer’s reasonable actions to comply with government guidelines for sanitation, social distancing, mask wearing, and other efforts that the employer uses to keep their guests and employees safe. This strategy could allow the employer to show it took affirmative steps to exclude sick people from its workplace.
But businesses still need to consider how their customers will react to such a questionnaire. Implementing a questionnaire may deter some customers who find it an impediment or feel it invades their privacy, while others may feel safer coming to your business because you screen everyone who enters.
Notices provide a more streamlined approach, communicating the same information as a questionnaire about the business’ steps to keep its premises safe, without requiring the individual to physically sign away any perceived rights. Communicating the rules and restrictions without asking questions or for a signature, notices require fewer steps from employers and customers than waivers and questionnaires.
Either approach requires employers to provide a handout or post signage at all entrances to the building that broadcast safety information and reasonable actions and prohibit sick or exposed persons from entering the building. These strategies allow people to feel safer and accept the risks when they enter the workplace.
Choosing A Strategy
Waivers have limited but potentially valuable benefits if enforceable. Employers should weigh those benefits against the potential impact on their business and carefully consider all their options, such as questionnaires or notices that communicate information and allow guests to assume risk.
No strategy can eliminate a company’s obligation to take reasonable actions to protect its employees and customers. The CDC, OSHA, and state or local authorities publish guidelines and guidance that businesses should follow. Demonstrating you followed such guidance will be the best proof your company acted reasonably in responding to COVID-19 risks.
Whether an employer institutes employee or customer waivers, they should develop written plans to reopen that include training for their employees on these guidelines and that document their efforts to comply. Ignoring these guidelines will make workplaces less safe and potentially expose employers to civil suits and government enforcement actions.
What Should Employers Do?
As you begin the process of reopening, you should familiarize yourself with several alerts from a national labor law firm: 5 Steps To Reopen Your Workplace, According To CDC’s Latest Guidance. You should also keep handy the 4-Step Plan For Handling Confirmed COVID-19 Cases When Your Business Reopens in the event you learn of a positive case at your workplace. For a more thorough analysis of the many issues you may encounter from a labor and employment perspective, we recommend you review our FP BEYOND THE CURVE: Post-Pandemic Back-To-Business FAQs For Employers and our FP Resource Center For Employers.
Perhaps the most challenging aspect of encountering a suspected or confirmed case of COVID-19 among your employees as you reopen your business is identifying those employees who worked near the infected worker – and thus must also be quarantined. Luckily, there is a simple numerical sequence you can remember that will enable you to follow the CDC contact tracing guidelines for general businesses: 6-15-48.
You will need infected employees to identify others who worked within 6 feet of them, for 15 minutes or more, within the 48 hours prior to the sick individual showing symptoms, or later.
Remembering these three numbers will offer you an easy way to navigate the CDC’s often complex and confusing guidance.
Determine Who Worked Within 6 Feet Of The Infected Employee
The first step requires you to inquire with the infected employee about those who worked within close proximity of them. The CDC generally defines a direct exposure to COVID-19 as an individual who is a household member with an infected person, intimate partner with an infected person, or an individual who has had close contact (< 6 feet) for a prolonged period of time with an infected individual.
For Those Who Worked Within 6 Feet, Was It For 15 Minutes Or More?
Another challenge for employers during this pandemic has been the constantly changing guidance from government agencies on how to address various workplace topics. The CDC’s definition of “prolonged period of time” is no exception. The current CDC guidance on this issue states that “recommendations vary on the length of time of exposure, but 15 minutes of close exposure can be used as an operational definition.” Thus, after identifying the employees who worked within six feet of the individual worker, you should determine if any remained within that proximity of the sick employee for 15 minutes or more.
Was The Direct Exposure For A Prolonged Period Of Time During The 48 Hours Before The Infected Employee Exhibit Symptoms Or Later?
The CDC defines the key period of time for determining if an employee was exposed to an infected worker as the “period from 48 hours before symptoms onset until” the infected employee is cleared to discontinue self-isolation. For purposes of contact tracing, the key here is to look at the 48 hours before the sick employee had symptoms and was still working in the workplace. If a sick employee worked on Monday and Tuesday, started showing symptoms at 8:00 a.m. on Wednesday, and immediately left the workplace, you should look for employees working near them starting at 8:00 a.m. on Monday.
Ask The 6-15-48 Employees To Remain Home For At Least 14 Days
After following the above three steps, you have identified the 6-15-48 employees. Although asking the sick employee to identify these workers is likely the best contact tracing tool, you may want to check video surveillance to confirm the accuracy of the 6-15-48 employees the sick worker identifies.
Once identified, the CDC guidance for non-critical businesses provides that the 6-15-48 employees should take the following steps:
If your company is part of the nation’s critical infrastructure, you may follow different CDC guidelines in lieu of quarantining 6-15-48 employees who are asymptomatic. However, all companies can use the guidance above to identify exposed, or 6-15-48, workers.
Conclusion
As orders allowing businesses to reopen continue to be issued, you will face new legal and practical challenges in the workplace. Addressing confirmed COVID-19 cases in your workplace will unfortunately become reality for many employers. Now is the time to prepare for such an event. This a constantly evolving area, with new guidance being issued nearly every day.
The COVID-19 pandemic has had an unprecedented impact on the workforce, shuttering businesses, prompting mass layoffs, and compelling speedy transitions to remote work. If your company has rushed to implement a temporary remote work practice to accommodate the sudden need for social distancing, or if you have seen the benefits of telework and now choose to maintain what was initially intended as a temporary remote work plan, this article will provide you guidance on the long-term maintenance of remote work plans. Specifically, this article discusses whether work can be performed remotely, the value of up-to-date remote work policies, hours worked considerations, and how to effectively manage remote employee performance and remote worksites.
1. Which Positions Are Appropriate For Remote Work?
You can measure the viability of remote work in a position by evaluating the feasibility of (a) performing all job functions remotely; (b) modifying the position to exclude non-remote job functions; or (c) modifying the position to be partially remote. In making this determination, and in addition to weighing the health and safety of employees and the community in the current circumstances, you may consider:
Once you decide whether remote work is appropriate and for what period, you should clearly articulate the type of telework arrangement that is acceptable (long-term, short-term, or partial). In partial telework-eligible positions, you should clearly define which job duties may be performed remotely and which require an employee to report in person. Maintaining clear rules and expectations is essential to managing remote workers for pay, leave, and discipline purposes, discussed in more detail below.
2. Do You Need To Institute Or Update Your Remote Work Policy?
You would would be well-served to have an up-to-date remote work policy. A clear, written policy is a great way to set remote work expectations for your employees and keep them up to date on your company’s official policies and procedures established in response to the COVID-19 pandemic. If you instituted a remote work policy specifically for COVID-19 and intended it for short-term use, or if you utilized an existing telework policy that did not specifically contemplate COVID-19, your policy may need tweaking.
A remote work policy should specify required work hours, meal/rest periods, time and attendance records, and whether employees must obtain permission prior to working outside of work hours (or working overtime), and how that permission should be obtained. It is important to fully consider all your needs and options when instituting a remote policy, so you should contact legal counsel before drafting or updating yours.
3. How Should You Track Time Of Remote Workers?
In order to track the working time of your remote workers, it is key to have a defined process to ensure accurate records. For example, you may require that employees have an established schedule, keep track of their own hours, and request from management permission to deviate from the established schedule for any reason. Such flexible work schedules may be difficult to manage and require a detailed analysis of the employee’s time and the employee’s leave to determine an employer’s obligations on any given day. Thus, it is important to emphasize to employees that they should be diligent with adhering to established schedules, but there should be an open dialogue for addressing deviations.
You should also properly determine what kind of time is compensable. It is not always obvious when an employee’s time must be included as hours worked. The following examples represent a few scenarios where the answer could require a more fact-specific analysis:
You should choose one method for tracking time and apply it uniformly across employees to the extent possible. Inevitably though, because there is no one best method for tracking employee time in all situations, the process will vary by employer, and even by position. Additionally, there might be some flexibility with respect to teleworking employees interrupted for COVID-19 reasons. Accordingly, you should consult with counsel if you have specific questions regarding what constitutes compensable time or the best methods to track compensable time in a given situation.
4. How Do You Manage Employee Performance Remotely?
Successful managers are consistent in applying policies and maintaining open communication with their employees. Specifically, you should ensure that you regularly:
You should diligently document any departures from established policy, timekeeping or otherwise, at the time the violation occurs or is discovered. You should also not fear pursuing discipline just because an employee is remote – you discourage misconduct by consistently disciplining employees who abuse telework and deviate from established policies. Conversely, employees who request accommodations in their work schedules for COVID-19 related or other protected reasons should be accommodated to the extent possible.
5. How Do You Maintain Remote Worksites?
You may be liable for injuries on the job even if they occur at a remote worksite. It is therefore important to ensure that teleworkers’ remote worksites are safe and suitable for a productive workday. Employees who are responsible for setting up their own worksites may fail to anticipate safety hazards or may not be concerned about safety risks. This could result in worksite arrangements that are prone to injury, including wire tripping hazards and non-ergonomic workstations.
Accordingly, it is prudent to establish remote worksite guidelines in your remote work policies that indicate your expectations of employee worksite set up and maintenance. You may also ask your managers to conduct periodic checks on an employee’s remote workspace by phone or video conference to ascertain whether they are complying with your expectations. These checks are also useful in discerning whether employees need any technological assistance or tools that would allow them to perform their job functions more efficiently, and whether any business expenses call for reimbursement. If you discover policy violations, you can correct the violations and, if necessary, impose discipline to deter future infractions.
Conclusion
Not every position is perfect for remote work. However, with careful consideration of work needs and position functions, you can take advantage of the many technological tools available and maintain a productive remote workforce. By diligently maintaining two-way discourse with remote employees and educating employees with clear, written, and up-to-date policies, you can ensure that your company is using remote work to its full potential.
As businesses gradually begin to ramp up and bring employees back to work, you may soon need to figure out what to do when employees who are receiving unemployment benefits refuse to return to work. After all, they may be reluctant or disincentivized to return to the job, especially if they can turn down your offer and still collect robust unemployment benefits.
As with all unemployment issues, the solution may differ from state to state – and employee to employee. But while the answers will vary depending on your workplace and individual employee circumstances, you can take steps now to put yourself in the best position to respond to such situations. We recommend an individualized 10-step plan of action to minimize your return-to-work headaches.
With the enactment of the CARES Act, employees qualifying for unemployment benefits are in line to receive an additional $600 benefit payment over and above the regular unemployment payment. This benefit is courtesy of the federal government program and continues through July 31, 2020. In many situations, however, the additional $600 benefit has created a disincentive for employees to return to work. This phenomenon has caused a dilemma for many employers (and employees) as businesses start to reopen.
At the lower end of the economic scale, many workers are receiving more from unemployment than they would earn from their regular wages. However, to remain eligible for unemployment benefits in all but a few circumstances, individuals who have been placed on a temporary layoff related to the COVID-19 pandemic must return to work if called back. And since most state unemployment agencies require or request that you notify them when you call an employee receiving unemployment back to work, the agency will likely deny ongoing benefits unless the employee can demonstrate good cause for refusing the offer.
The determination as to what constitutes good cause for the job refusal, however, will be viewed in light of the COVID-19 pandemic and will be subject to agency review. The U.S. Department of Labor and many states have emphasized that an unreasonable fear over the risk of contracting the virus in the workplace is not enough to constitute good cause, and state agencies will likely deny unemployment claims if this is the only reason offered.
Several states, however, including Washington, Colorado, Alaska, and Texas, have already adopted rules outlining when an employee’s refusal to return to work may rise to the level of good cause. These rules generally protect unemployment benefits for “high risk” or “vulnerable” employees, such as workers over 65 or with underlying medical conditions.
For example, Texas Governor Abbott has directed the Texas Workforce Commission to continue providing benefits even when the employee refuses an offer of suitable employment where (1) the employee is 65 or older or at higher risk for getting very sick from COVID-19; (2) the employee has a household member at high risk; (3) the employee or a household member has been diagnosed with COVID-19 (and not recovered); (4) the employee is under quarantine due to close contact or exposure to COVID-19; or (5) the employee has child care responsibilities and the school or daycare is closed (and employee has no available alternatives).
Given the complicated issues created by the COVID-19 pandemic, you should be careful to consider the best approach for your workplace and employees. A thoughtful and transparent return-to-work process will help ensure employee safety and boost morale. Here is a 10-point plan you should implement to ensure a smooth return-to-work for your organization.
What Else Should Employers Do?
As you begin the process of reopening, you may want to familiarize yourself with several alerts courtesy of Fisher Phillips LLP :
This week the IRS released two new sets of rules impacting Section 125 Cafeteria Plans. Notice 2020-33 provides permanent rule changes that include an increase in the amount of unused benefits that Health FSA plans may allow plan participants to rollover from one plan year to the next. Notice 2020-29 provides temporary rules designed to improve employer sponsored group health benefits for eligible employees in response to the coronavirus pandemic. The relief provided under each notice is optional for employers. Employers who choose to take advantage of any of the offered plan options will be required to notify eligible employees and will eventually be required to execute written plan amendments.
Notice 2020-33 modifies the amount of annual rollover of unused benefits that Health FSA plans may offer to Plan participants. Up until now, rollovers have been limited to $500 per Plan Year. The new rule sets the annual rollover limit to 20% of the statutory maximum annual employee Health FSA contribution for the applicable Plan Year. Because the statutory maximum is indexed for inflation, most years it increases (in mandated increments of $50).
The notice provides that the increased rollover amount may apply to Plan Years beginning on or after January 1, 2020. Because the corresponding annual Health FSA employee contribution limit for those Plan Years is $2,750, the annual rollover limit may be increased up to $550.
The relief provided under Notice 2020-29 falls into two major categories, both of which apply only for calendar year 2020. First, the IRS introduces several significant exceptions to the mid-year change of election rules generally applicable to Section 125 Cafeteria Plans. Second, the notice contains a special grace period which offers Health Flexible Spending Arrangement (FSA) and Dependent Care Assistance Program (DCAP) Participants additional time to incur eligible expenses during 2020.
The temporary exceptions to mid-year participant election change rules for 2020 authorize employers to allow employees who are eligible to participate in a Section 125 Cafeteria Plan to:
None of the above described election changes require compliance with the consistency rules which typically apply for mid-year Section 125 Cafeteria Plan election changes. They also do not require a specific impact from the coronavirus pandemic for the employee.
Employers have the ability to limit election changes that would otherwise be permissible under the exceptions permitted by Notice 2020-29 so long as the limitations comply with the Section 125 non-discrimination rules. For allowable Health FSA or DCAP election changes, employers may limit the amount of any election reduction to the amount previously reimbursed by the plan. Interestingly, even though new elections to make Health FSA and DCAP contributions may not be retroactive, Notice 2020-29 provides that amounts contributed to a Health FSA after a revised mid-year election may be used for any medical expense incurred during the first Plan Year that begins on or after January 1, 2020.
For the election change described in item 3 above, the enrolled employee must make a written attestation that any coverage being dropped is being immediately replaced for the applicable individual. Employers are allowed to rely on the employee’s written attestation without further documentation unless the employer has actual knowledge that the attestation is false.
The special grace period introduced in Notice 2020-29 allows all Health FSAs and DCAPs with a grace period or Plan Year ending during calendar year 2020 to allow otherwise eligible expenses to be incurred by Plan Participants until as late as December 31, 2020. This temporary change will provide relief to non-calendar year based plans. Calendar year Health FSA plans that offer rollovers of unused benefits will not benefit from this change.
The notice does clarify that this special grace period is permitted for non-calendar year Health FSA plans even if the plan provides rollover of unused benefits. Previous guidance had prohibited Health FSA plans from offering both grace periods and rollovers but Notice 2020-29 provides a limited exception to that rule.
The notice raises one issue for employers to consider before amending their plan to offer the special grace period. The special grace period will adversely affect the HSA contribution eligibility of individuals with unused Health FSA benefits at the end of the standard grace period or Plan Year for which a special grace period is offered. This will be of particular importance for employers with employees who may be transitioning into a HDHP group health plan for the first time at open enrollment.
As mentioned above, employers wishing to incorporate any of the allowable changes offered under Notices 2020-29 and 2020-33 will be required to execute written amendments to their Plan Documents and the changes should be reflected in the Plan’s Summary Plan Description and/or a Summary of Material Modification. Notice 2020-29 requires that any such Plan Amendment must be executed by the Plan Sponsor no later than December 31, 2021.